E-drug: USA drug prices debate flares up (cont)
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Blaine Carmichael expresses frustration at the US having to bear an unfair
share of the R&D costs for pharmaceuticals. In general, large successful
economies pay more than their 'fair' share of technology development costs
as they benefit more from the resulting advances. It is a good investment.
It is also rational for small less wealthy nations to 'free ride' on this
R&D.
If the market is working things often seem to work out. For instance,
computers are much faster and cheaper than 10 years ago. Much of the R&D
was done in the US, and people living there have benefitted enormously.
However, poorer countries have also benefitted from this R&D with cheaper
computers and real improvements in communications - for example 'E-DRUG'.
To me, the main problem with pharmaceutical prices appears not to be R&D
costs, but market failure. While other 'high tech' products offer 'more for
less' than ten years ago (eg computers, automobiles, phones, sound
systems), this is not so with drugs. A few drugs offer a lot more than
old drugs, but many represent only modest improvements (and some offer
nothing); but they usually cost a lot more.
So why the difference? It cannot simply be development costs - as Jamie
Love has pointed out in E-DRUG these may not be as high as some in the
industry have claimed; other industries have to live with high development
and re-tooling costs, but they don't claim constantly that they need to
pass these on in full to the consumers. It is also simplistic to blame the
promotional techniques of industry. They are part of the problem, but on
their own they will not distort the market to the degree that we have seen.
There must be other explanations.
Have we reached a period of diminishing returns for research investment in
drugs, a true flattening of the knowledge curve? This would lead to an
increasing marginal cost for each marginal gain.
Is excessive pursuit of 'me too' drugs (that are profitable in an
uncritical market) inhibiting true innovation?
Is there excessive regulation, as some in the industry claim? Or in
reality is there 'regulatory capture' whereby the licensing authorities
have become apologists for the industry? With cost-recovery policies, and
under political pressure, are they too ready to use inferior data to
expedite approvals of costly but only modestly effective drugs (such as
holinesterase inhibitors for Alzheimer's disease, interferons in MS,
leukotriene antagonists in asthma)?
Is it the fault of funders of healthcare programs, who have failed to
identify and describe needs properly, and wield their true market power in
the interests of patients?
Or is it the fault of doctors who, blinded by new technology, usually lobby
for increased expenditure rather than lower drug costs? - an odd thing for
patient advocates to do.
Is it other aspects of market failure, such as secrecy (eg non-publication
of COX-2 inhibitor trial data), and information assymetry, that lead to
flawed decisions and prices?
Is it the fact that those with the greatest capacity to benefit are the
least able to pay, and are required to make decisions when they are least
equipped to do so, with incomplete or biased information?
Are the industry's expectations of profit (conditioned in the US in the
1970s and 80s, and with higher margins than other industries) just
unrealistic? Or are they good at price fixing in ways that fool the
competition agencies?
Or is it the fault of the media, who breathlessly and obsequiously tout
every new drug story from a medical PR company as a 'breakthrough' and then
ignore the issues of true benefit, toxicity, affordability and opportunity
cost? Surely these issues are not beyond the ability of a journalist with
a university degree?
Or is it the fault of the public who believe what they read - that new
drugs are always better, - and suspend the judgements (and the scepticism)
that they would apply to such claims were they applied to other
(non-pharmaceutical) products?
Anybody have other suggestions?
David Henry
David Henry
Professor of Clinical Pharmacology
School of Population Health Sciences
Faculty of Medicine and Health Sciences
The University of Newcastle
New South Wales
Australia
Phone +61 249 211856
Fax +61 249 602088
David Henry <mddah@ibm.net>
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